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Chinese economy on course to stabilize in May

(Shanghai Daily)

13:28, June 05, 2012

China's economy may start to stabilize in May after the sharp slowdown in April but industrial production, fixed-asset investment, retail sales and trade may still remain weak, analysts said.

They predict that the world's second-largest economy to pick up from this month after the current stimulus measures filter through.

"We expect signs of stable growth from the upcoming data release for May," said Helen Qiao, managing director at Morgan Stanley Research.

"After the downside surprise from the April growth data, we expect the May data to confirm growth is stabilizing. We also look for some improvement in month-on-month growth due to a more favorable calendar effect and policy easing kicking in," Qiao said, referring to 22 working days in May against 21 a year ago.

To boost the economy, China has unveiled a set of stimulus, including subsidies for buying energy-saving appliances and alternative-energy cars, expanding private investment into some state-dominated fields and faster approval for new investment projects.

The closely-watched economic data will be released at the weekend.

Although industrial production may recover slightly, Qiao said it will remain soft amid weak industrial demand and a low level of manufacturing activities. Fixed-asset investment will likely stay flat from April's as the potential rebound in social housing construction is offset by lackluster commodity housing investment. Retail sales may grow slightly.

The Consumer Price Index, a general gauge of inflation, may rise 3.2 percent from a year earlier in May, declining further from April's 3.4 percent and allowing more room for policy stimulus.

But Lu Zhengwei, an economist at Industrial Bank, was more pessimistic about the growth prospects.

"The data may increase anxieties of policy makers about the future," Lu said.

He added that ''the fixed-asset investment growth may slip below 20 percent" while exports and imports will recover slightly but still fall short of the annual government goal of 10 percent. He sees industrial output to rise by single digit.


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